Does a Quebec company have to pay Employer Health Tax on remuneration paid to its Ontario sales representatives?
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This interpretation letter was issued based on the specific circumstances or situation of a taxpayer or vendor and the law and tax policy in effect at the time the ruling was issued. Specific facts relevant to your situation may change the application of the tax. In accordance with the Freedom of Information and Protection of Privacy Act, all confidential and identifying information has been removed from this interpretation letter. Please be aware that any statute or policy referred to in this letter may have been superseded. Where a letter contains links to a publication, the link is to our current publication on that subject, regardless of the date that the ruling was originally issued, and the current publication may not be reflective of the information originally provided. In no event shall the Government of Ontario be liable for any damages whatsoever arising out of, or in connection with, the use of the information contained herein.
Interpretation Letter 08-0011, December 2008
We refer to your letter dated XXXXXX regarding Company A and the Employer Health Tax (EHT).
EHT is payable by all employers who pay remuneration to employees who:
- report for work at a permanent establishment (PE) of the employer in Ontario, or
- are not required to report for work at the employer’s PE, but are paid from or through a PE of the employer in Ontario.
Remuneration paid to employees who report for work at a PE of the employer outside of Ontario is not subject to EHT.
A PE usually consists of a physical structure or building where employees work such as an agency, a branch, a factory, a farm, a gas well, a mine, an office, an oil well, timberland, a warehouse and a workshop. A PE may also exist or be deemed to exist where the employee:
- has general authority to contract on behalf of the employer in his or her province/jurisdiction of residence
- conducts day to day business of the employer at an office in his home, or
- fills orders from stock of merchandise owned by the employer.
From your correspondence and our conversations we understand that:
- Company A is a manufacturer of quality XXXXXX products
- Company A’s head office is located in Quebec
- Company A has a warehouse in Ontario
- Company A has representatives (Reps) working on the road in Ontario trying to find new clients
- Reps living and working in Ontario do not report to the warehouse in XXXXXX Ontario
- Reps are hired and paid from Company A’s head office in Quebec
- Reps receive direction and are supervised from head office
- They submit attendance records and expense claims to the Quebec office
- Reps work from a price list established by head office and do not have general authority to contract on behalf of Company A
- Their home offices are not publicly advertised in any of Company A’s promotional material nor are they commercially registered
- In 2008 or 2009, Company A anticipates hiring an Ontario resident employee who will be responsible for Ontario-based representatives.
Based on the information provided, it is our opinion that remuneration paid to the Reps who do not report for work at the warehouse in Ontario is not subject to EHT because they are considered as reporting for work at Company A’s head office in Quebec.
Interpretations are issued based on the actual facts surrounding a particular case. As a result, we are not able to provide an opinion on the EHT implications without knowing for certainty if Company A is going to hire an Ontario employee to be responsible for Ontario-based representatives.
This interpretation is based on the information provided by you and is applicable to Company A only. However, if it is determined that the information is incorrect or incomplete, this interpretation will not be binding. In addition, if Company A hires an individual to be responsible for the Reps in Ontario, please provide this office with the pertinent details of that individual’s conditions of employment, including the individual’s reporting structure, so that we can reassess the situation.
